Oct 2008 31

Let’s not have tax rises as soon as the recession is over4

An interesting interview with George Osborne on the Today programme this morning (7.51am).  He argued that beyond allowing the automatic stabilisers to operate and bringing forward capital spending within existing limits, there should not be a big Keynesian spending splurge.  Absolutely right.

He also said that there should be some targeted tax relief – a council tax freeze and reductions in payroll tax for small companies.  Again absolutely right.

Although it was welcome to hear the Shadow Chancellor say that tax rises in a recession would be absolutely crazy (and to warn that tax rises on small companies and family cars are still planned for next year), more worrying is the constant refrain from the Tories about tax rises to come (presumably after the recession is over).  If the Government are spending too much (which they are), then surely it would be best to reduce spending after a recession, not raise taxes.  We shouldn’t be hitting taxpayers as soon as the recession is over. 

The counter-argument may be that the deficit will be so huge that both spending cuts and tax rises will be needed.  That’s not an argument taxpayers should buy.  If spending is too high, there’s only one solution – reduce it.  If the Tories get into power and raise taxes, voters will not thank them for it. 

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  • John Coles

    Why on earth don’t the Tories have the spine to recommend expenditure cuts NOW ahead of Brown’s spending splurge?
    What about halving the expenditure on QUANGOS, presently £124bn? Who would notice save those overpaid worthies infesting these bodies?
    Similarly, what about scrapping all of the Regional Development Agencies?
    What about scrapping the Identity Card scheme?
    The list is endless.
    The problem is that little Gideon Osborne has neither the drive not the courage to consider such radical changes.
    Instead he, with his chum Mr Cameron, are desperate to keep a low profile, commit to nothing, ensure that no one can call them the “nasty Party” again and so guarantee their continued social acceptability within London’s media/social/political circus.
    I’m a Tory – what the hell are they?

  • http://climateresearchnews.com/ Paul Biggs

    Well said!
    Plus, the Tories failed to challenge the King Canute Climate Bill, which has a price tag of about £280 billion for zero effect on climate.

  • Call me Dave

    DC & GO are in a no win position. Their instincts are to reduce taxation and reduce spending. It would be electorially ill advised to announce ahead of a general election too many details. Unless of course you do want them to be brutally honest and find yourselves with yet another Labour term.
    On spending the big win is reforming public sector pensions, which if you’ve read my posts on the subject, will realise there is a minimum of £50bn a year to be saved. The prerequisite to reform is scrapping the MP’s own ludicrous arrangement which DC has already commited to. If he were to announce ahead of an election that he was going to scrap the final salary arrangement for the whole public sector that would cost perhaps 100 seats. Not a great idea if you want to be elected.
    On tax. The Labour government did the right thing!! During a period of sustained growth GB taxed us until the pips squeeked. The mistake he made was wasting the whole lot!!
    The correct approach is;
    1/ During periods of growth; Increase taxation, reduce spending (make the public sector smaller) and build up a huge surplus.
    2/ During a period of recession do the opposite ie decrease taxation and increase spending. (using the HUGE surplus you have built up)
    The problem with number 2 is you have to implemented number 1 in full. Labour being labour want their cake and eat it too. They taxed us to death, built up a defecit, increased the size of government and increased spending.
    PURE INCOMPETENCE.

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